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Monday, March 20, 2017

What's the Value of US Household Production?

The value of household production has never been included in GDP. But although this is sometimes interpreted as a knock against those who do most of household production, it's really just a matter of accounting. To be included in GDP, there needs to be a market transaction. Even back in 1934, when Simon Kuznets was reporting the first estimates of "national income" to the US Congress, he was careful to note: "A student of social affairs who is interested in the total productivity of the nation, including those efforts which, like housewives' services, do not appear on the market, can therefore use our measures only with some qualifications."

"The volume of services rendered by housewives and other members of the household toward the satisfaction of wants must be imposing indeed, when totaled for the 30 million families comprising the population of this country; and the item is thus large enough to affect materially any estimate of national income. But the organization of these services render them an integral part of family life at large, rather than of the specifically business life of the nation. Such services are, therefore, quite removed from those which gainfully occupied groups undertake to perform in return for wages, salaries, or profits. It was considered best to omit this large group of services from national income, especially since no reliable basis is available for estimating their value. This omission, unavoidable though it is, lowers the value of national income measurements as indexes of the nation's productivity in conditions of recent years when the contraction of the market economy was accompanied by an expansion of activity within the family. ... Thus, the estimates submitted in the present study define income in such a way as to cover primarily only efforts whose results appear on the market place of our economy. A student of social affairs who is interested in the total productivity of the nation, including those efforts which, like housewives' services, do not appear on the market, can therefore use our measures only with some qualifications."

The starting point is to use surveys of time use, like the American Time Use Survey (ATUS) and the Multinational Time Use Survey (MTUS). The categories and reporting in these surveys have varied over time, and thus the results should be interpreted with a degree of caution, but broadly, there are seven categories of household production "housework, cooking, odd
jobs, gardening, shopping, child care, and domestic
travel." Then the hours spent on these tasks are multiplied by the wage commonly paid in the market for those doing these domestic tasks.

The value of household services was equal to about 37% of GDP in 1965, but is currently equal to about 23% of GDP. As Bridgeman writes:

"Household production has declined in importance
over time as more women engage in market work. ... Including
household production in 2014 would increase
national output by 23 percent, less than the 26 percent
in 2008. Since much of the decline in market work was
driven by men, who spend relatively little time in home
production, the shift is not enough to counteract the
general decline of the household sector. The gap between
working and nonworking men is also relatively
small, so moving a man from the market to the home
does not increase his hours much. Working men spent
an average of 16.2 hours per week in household production,
only slightly less than the 21.2 for nonemployed
men. In contrast, the movement of women into
market work had a big impact since there is a significant
difference in hours that employed and nonemployed
women devote to home production. Working
women devoted 23.2 hours of household production
compared with 33.2 hours for nonworking women in
2014."